Government’s SME Spend on Target

The awarding of more public sector contracts to small and medium-sized businesses (SMEs) is on track according to the latest figures…

Business secretary Vince Cable is considering imposing a levy on late paying firmsTargets to award as much as 25% of central government contracts to SMEs is on target says the Cabinet Office.

In figures released today, the actual amount of money spent with SMEs has only gone up by a small amount but, with a reduction in contracts overall, this has translated into a bigger share of contracts for SMEs.

In 2011/2012, when the government announced that it would endeavour to award more public sector work to small and medium-sized firms, £2.9 billion was being indirectly spent with SMEs, around 6.5% of all government department work. Direct spend accounted for £4.4 billion and 10.1% of money to small firms. Prior to this, in 2009/2010 the overall figure was a mere 6.5% of all government contracts with SMEs.

In 2012/2013 the amount of indirect spending had risen to £4 billion and accounted for 9.4% of cash flow towards SMEs with direct spending rising to just £4.5 billion but amounting to 10.5% of cash flows to smaller firms.

Procurement Policy Changes

One influencing factor on better supply chain management has been the LEAN procurement principle where the time between publishing and awarding contracts has been slashed from 208 to 102 working days.

Other factors are the abolition of Pre-Qualification Questionnaires (PQQs) for goods and services under the £100,000 threshold. This may have helped speed up the procurement process but is still in place for contracts where security is of paramount importance.

The introduction of the online tool Contracts Finder in 2011 has also seen over 6,000 low value contracts advertised openly alongside improvements in contract pipelines, cross-governmental contracts and a better integrated construction strategy.

Fronting the report, Chloe Smith MP, acknowledged that of the country’s 4.5 million businesses 99.9% were SMEs and, with an estimated £1.5 trillion in turnover, were repsonsible for 14 million private sector jobs.

Furthermore, data from the Office for National Statistics showed that for ecvery £100 of turnover big businesses add just £26 gross value to the UK economy whilst SMEs create £33.

With this in mind, the government is pushing towards achieving 25% of all central contracts to SMEs by 2015.

The full details of the improvements in the contracts landscape can be seen in the PDF Making Government Business More Accessible to SMEs – Two Years On.

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For further business advice see our article on The Benefits of Just In Time Working.

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